Wayfarer Aviation takes over assets of shuttered JetDirect

 - April 29, 2009, 7:27 AM

The soaring enterprise that started as JetDirect Aviation and grew into a charter/ management operator of 300 aircraft by swallowing up some of the biggest names in the charter industry is no more. On April 17, JetDirect Aviation founder, chairman and CEO Greg Campbell informed employees that JetDirect “will cease to operate; therefore all positions have been eliminated.”

On the same day, Wayfarer Aviation announced it had purchased “substantially all the assets of JetDirect Aviation.” Wayfarer Aviation is the new name for JetDirect Aviation Acquisition Company (JDAAC) and is backed by Brantley Partners of Beachwood, Ohio. Brantley managing partner Robert Pinkas is the new chairman of Wayfarer Aviation.

The shutdown of JetDirect Aviation left an unknown number of vendors, former and current employees, charter and management clients and creditors without payment for services provided, charters flown and acquisitions made. The list of acquired companies reads like a pedigree of charter industry pioneers, and while some of those companies have disappeared, others have risen from the financial meltdown that dogged JetDirect to reclaim their brand names and try to make a go of their businesses beyond the failed JetDirect umbrella.

So far, only two companies have managed to pull out of the JetDirect vortex: maintenance company JetCorp, which was sold to Flying Colours; and Sunset Aviation LLC, which was launched by the owners who sold Sunset Aviation Inc. to JetDirect. According to Dan Drohan, Sunset founder and CEO, JetDirect still owes millions of dollars for its 2007 purchase of Sunset Aviation Inc.

The new Sunset Aviation LLC expects to obtain its new Part 135 charter certificate shortly, according to Drohan, and Sunset has already signed a number of former JetDirect management clients. JetDirect also never fully paid what it owed for the purchase of assets of Tag Aviation USA in 2007, and JetDirect still owes Tag $31.5 million for that deal. Another JetDirect subsidiary, Presidential Aviation, is still trying to separate itself from its parent company, but that severance had not yet taken place as this issue went to press.

JetDirect’s assets were owned by Sovereign Bank, which is wholly owned by Spain’s Banco Santander. Sovereign was owed about $5 million by JetDirect, and the sale of the JetDirect assets to JDAAC/Wayfarer is assumed to have covered that debt. Any money left over after paying Sovereign Bank was to go to the next creditor in line, Contrarian Capital (owed $38.3 million). Although no money was available to pay them, Tag Aviation was next, followed by ABS Capital ($11.8 million) and SJH Capital ($25.4 million).

The Wayfarer Aviation name traces its roots to the Rockefeller family flight department, which became an aircraft management company called Wayfarer Ketch, then Wayfarer Aviation. The company was sold to Tag Aviation in 1999, and thus JetDirect and now JDAAC owns that brand name. There is another Wayfarer, however, an aircraft management and sales company (not charter) based in Trenton, N.J., called Wayfarer Jets. This Wayfarer was founded by former Wayfarer Ketch pilots and staff and is headed by president Walter Kraujalis.

An important factor in making the JDAAC acquisition of the JetDirect assets worthwhile was whether enough management clients agreed to sign up with the new company. Pinkas has indicated that the purchase price was $20 million and also that he hoped that 500 JetDirect employees and 97 aircraft would make the switch.

As of April 22, the new Wayfarer Aviation had 24 aircraft on its charter certificate,
a total of about 50 to 60 aircraft under management and 300 employees, according to a spokeswoman. Management clients who were owed money were promised reimbursement if they signed up with JDAAC/Wayfarer, and these funds will be paid on a pro-rated basis during the coming 12 months, according to Wayfarer.

Wayfarer Aviation has also promised to keep management clients’ money in segregated bank accounts and not to commingle those funds with company or other clients’ funds. One client told AIN he was owed $400,000, and employees of other clients claimed numbers as high as $500,000. Some of these clients have elected to forego the money owed them and have moved their aircraft to other management firms.

The FAA issued a new Part 135 certificate to JDAAC (doing business as Wayfarer Aviation). Wayfarer Aviation’s corporate headquarters is in Rye Brook, N.Y., and the operations center is in Weymouth, Mass. “The company will be debt-free and properly capitalized going forward,” said Pinkas.

None of this is any comfort to the former JetDirect employees who no longer have a job and who are still owed payroll and expense reimbursements. Some have told AIN that recent payroll deductions for 401(k) plans were never deposited in their 401(k) accounts. Others face medical bills due to health insurance plans canceled before JetDirect closed. Many were never reimbursed for expenses they incurred during trips because FBOs would not accept JetDirect credit for fuel. Many employees were asked to use their own credit cards to pay for fuel, hotels and meals.

Pinkas had promised to pay the money owed to current and former JetDirect employees, but JDAAC/Wayfarer Aviation no longer has anything to do with JetDirect. The issue is more complicated for former JetDirect employees who now work for Wayfarer, as payment for unreimbursed expenses at the old company might be taxed as income from the new company.

Sovereign Bank owned all JetDirect assets, according to court affidavits filed by Sovereign. According to former JetDirect employees, Greg Campbell indicated it was likely that JetDirect would be placed into Chapter 7 (liquidation) bankruptcy after the asset sale to JDAAC, but that had not taken place by April 22. Meanwhile, attorney Ed Kammerer at law firm Hinckley- AllenSnyder has been gathering information from former JetDirect employees in preparation for a class-action lawsuit.

Another question has been raised, and that is whether Department of Transportation (DOT) regulations were violated during foreign-owned Sovereign Bank’s ownership of JetDirect Aviation. DOT rules limit the percentage of an air carrier that can be owned and managed by a foreign corporation. A DOT spokesman would neither confirm nor deny whether Sovereign Bank’s ownership of JetDirect Aviation is under investigation. “Part 135 carriers, including charter carriers, are air carriers and must meet the statutory citizenship requirement,” he said. “The department does not publicly discuss specific cases.” Sovereign Bank did not respond to AIN’s questions.